Acct504 Study Questions

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 52 (12050 words) Published: September 12, 2013
8/4/13

Chapter 1 Results

36% (9 out of 25 correct)

Responses to questions are indicated by the

symbol.

1. Corporations generally receive more favorable tax treatment than sole proprietorships and corporations. A. True B. False

Correct! Sole proprietorships and partnerships generally receive more favorable tax treatment than corporations.

2. Which is not one of the three forms of business organization? A. Sole proprietorship B. Creditorship C. Partnership D. Corporation

This is one of three forms of business organization discussed in the chapter.

3. Which is an advantage of corporations relative to partnerships and sole proprietorships? A. Increased difficulty of raising funds B. Harder to transfer ownership C. Reduced legal liability for investors D. Most common form of organization

Ownership is easier to transfer in a corporation than in a partnership or proprietorship.

4. Easy transfer of ownership is a characteristic of which form of business organization? A. Sole proprietorship B. Partnership C. Corporation higheredbcs.wiley.com/legacy/college/kimmel/1118162285/self_test/ch01.html?newwindow=true 1/8

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Chapter 1 Results

D. All of the answer choices are correct

Partnerships are effectively dissolved when any portion of the partnership is sold, closed, boughtout by the other partners, or bought by a new partner or partners.

5. In which forms of business organization are the owners personally liable for all the debts of the business? A. Sole proprietorships and corporations B. Sole proprietorships and partnerships C. Partnership and corporation D. All of the answer choices are correct

Correct! Owners are personally liable for all debts of the business in both sole proprietorships and partnerships.

6. The sole proprietorship form of business organization A. must have at least two owners in most states. B. generally receives favorable tax treatment relative to a corporation. C. combines the records of the business with the personal records of the owner. D. is classified as a separate legal entity.

Correct! Because sole proprietorships have the ability to report business entity gains on their personal income tax returns, both sole proprietorships and partnerships have a tax advantage over the corporation.

7. Which forms of business organization are considered to be separate accounting entities? A. Sole proprietorships and partnerships only B. Partnerships and corporations only C. Only corporations D. Sole proprietorships, corporations, and partnerships

higheredbcs.wiley.com/legacy/college/kimmel/1118162285/self_test/ch01.html?newwindow=true

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These are both separate accounting entities, but there is a better answer.

8. Internal users of accounting information include a company's stockholders. A. True B. False

Correct! Since stockholders are not normally officers, directors, or managers of the company, they are considered external users of accounting information.

9. To which of the following questions will internal users want answers? A. What selling price for our product will maximize the company's net income? B. Which product line is most profitable? C. Is cash sufficient to pay dividends to stockholders? D. All of the answer choices are correct.

Product price is important as well as profitability and availability of cash.

10. Which of the following is not an external user of accounting data? A. Labor unions B. Customers C. Economic planners D. Chief Financial Officer

Since customers receive only information released to the public, they are considered external users of accounting data.

11. Which statement about users of accounting information is incorrect? A. Management is considered an internal user. B. Taxing authorities are considered external users. C. Present creditors are considered external users. higheredbcs.wiley.com/legacy/college/kimmel/1118162285/self_test/ch01.html?newwindow=true 3/8...
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